Surviving in a moment of rental hikes and inflation
ARI SHAPIRO, HOST:
The rental market is wild right now. It's the same story in so many places, not just New York or LA. Cincinnati...
UNIDENTIFIED REPORTER #1: Some people saw their rent rise an extra $300 this...
UNIDENTIFIED REPORTER #2: ...Whose rent is going up more than 800 bucks.
SHAPIRO: Chapel Hill...
UNIDENTIFIED REPORTER #3: A single mother in Chapel Hill says rent is going up $400 a month...
SHAPIRO: According to Redfin, listed rents on available properties are up 15% nationally over a year ago. In some cities, they're up 30% or more. That's well over the rate of inflation. Given all that, it might seem cheaper to buy a place, except...
KIM DROTAR: I can't qualify for as much of a mortgage as I could have. And it's been really discouraging.
SHAPIRO: Kim Drotar is a public school teacher, and she told NPR she'd been looking to move out of her St. Louis rental apartment and buy a place - somewhere her fifth-grade daughter could have more space.
DROTAR: I just want someplace where she can ride her bike and make friends with the neighbors and play with the kids and they can come over.
SHAPIRO: But lately, she can't find a home in her price range, and it's only getting more expensive to buy one. For years, there hasn't been enough new construction in the U.S., especially starter homes and small apartments. And now interest rates are going up, and the Fed is hiking them further to fight inflation.
DROTAR: The hope was that that would then lower the prices of houses, but it hasn't. And it's pricing me out of the market fully.
SHAPIRO: More and more people are finding themselves in that situation. Mortgage applications are down 20% from a year ago, but that puts even more pressure on the rental market as buyers stay renters and renters find new and intense competition for existing apartments. Now, NPR's Jennifer Ludden reports, some people are finding themselves in rental bidding wars.
JENNIFER LUDDEN, BYLINE: When Sarah DeCosta (ph) had to find a new apartment in Chicago with her husband, baby and dog, the whole process seemed weird. She'd never heard of an open house for a rental.
SARAH DECOSTA: And literally, like, people couldn't even fit in the house. And we got there right when it started.
LUDDEN: Then the listing agent said, submit your best and final. DeCosta's realtor said that meant above asking. They'd already lost out once, so...
DECOSTA: On this place that was actually smaller than the place we were living in before - and that was more expensive - we offered $150 more a month in rent, and we still didn't get it.
LUDDEN: That happened again and again. And it's not only in big cities. In Port Orange, Fla., Brandon Schwedes (ph) is a 40-year-old single dad who was forced to move this year. First his landlord said she wanted to sell the place, but when he started looking around...
BRANDON SCHWEDES: I found the house that I was living in posted for rent for $2,000, and I was paying 1,400.
LUDDEN: His rent was nearly half his take-home pay. Still, Schwedes applied for another place that was 1,750 and was told he had a lock on it. But the next day the agent said, sorry, someone else had just offered $200 more.
SCHWEDES: And the other people hadn't even seen the home. They just found it online and were willing to say, hey, we'll pay more, and we'll pay now.
LUDDEN: Schwedes ended up finding a place at his same rent, but it's much smaller. There's no yard or garage, and it's farther from his kids' school. He says he always hoped to eventually buy a house, a place where his children could always gather on holidays, bring the grandkids.
SCHWEDES: The stuff that you think is normal, that you see in movies growing up.
LUDDEN: But now he feels that will never happen for him.
SCHWEDES: I've lived in the same area for the last 20 years. I know what these houses were renting for and what they were selling for. But, you know, what's occurred over the last two years, it's like, just boom - destruction.
LUDDEN: A lot of factors led to this record surge in rental demand. Jessica Lautz of the National Association of Realtors says for more than a decade, the U.S. has not built enough new homes. Now supply chain delays are slowing construction. Plus, those priced out of mortgages are staying put. And on top of all this, millennials hitting their late 20s are eager to move out on their own.
JESSICA LAUTZ: And so as we see this demand really pushed up against this huge wave of young adults starting household formation, there's no quick solution to this.
LUDDEN: So it's a good time to be a landlord. Bashir Nurudeen (ph) and his wife own nine rental units in Chicago, and one came open recently.
BASHIR NURUDEEN: I had so many phone calls that I just stopped answering calls. Over 100 people, between emails and phone calls, contacted me about that apartment.
LUDDEN: He's had bidding wars, but he says they make him feel smarmy, so he no longer allows them. He actually prides himself on offering just under market rent. But the last two years have been rough. One tenant stopped paying for most of a year and caused major damage to the apartment, yet he couldn't evict her under the pandemic moratorium. And all that work from home was hard on refrigerators, washers, AC.
NURUDEEN: I actually really can't remember how many appliances we replaced in the last year.
LUDDEN: So when a $1,200-a-month, three-bedroom came open, he listed it for 1,785.
NURUDEEN: And that apartment, I raised the rent by this drastic amount, not because that's what I would typically do, but because I have to recoup all these losses that I've had over the last year.
LUDDEN: The tight market and skyrocketing rents make it even tougher for those who've long struggled to find affordable housing. Lindsey Siegel is with Atlanta Legal Aid Society.
LINDSEY SIEGEL: Just the act of applying for apartments is incredibly unaffordable for low-income tenants because once you pay that application fee once or twice or three times, you don't have any money left to pay that first month's rent or the security deposit. And then you're stuck.
LUDDEN: Dana Johnson (ph) just got terrible news. The 54 year old lives northeast of Atlanta and faces eviction after losing her job as a property leasing agent last year. She can pay what's due with emergency rental aid, and she hoped to stay put so she doesn't face even higher rent, but the landlord decided she needs to move out.
DANA JOHNSON: I'm just going to have to look for as many jobs as I can get because I have to pay rent that is astronomical right now, and it doesn't compensate with the salaries that are available.
LUDDEN: She's already started her own company to sell doggy apparel. But if it doesn't all work out, she'll probably look for someone else who's also struggling and needs a roommate. Jennifer Ludden, NPR News.
SHAPIRO: Let's talk more about one thing you just heard there - emergency rental aid. During the pandemic, the federal government offered it in the billions, but now that money is almost all gone. And other pandemic protections, like eviction moratoriums, are mostly a thing of the past, too. So what does all this mean for people vulnerable to eviction in a red-hot rental market?
CARL GERSHENSON: The pandemic years were actually some of the only two years in recent history where renters at the bottom of the market had the kinds of protections that they need to enjoy the housing security that renters in the rest of the United States have taken for granted for decades.
SHAPIRO: That's Carl Gershenson of the Princeton Eviction Lab. He says there are changes in the ways evictions can follow someone looking for a new place to live.
GERSHENSON: One trend, you know, over the last two decades is records from housing courts have been made electronic. It makes it so much easier for landlords to consult them, especially for a landlord to consult records from, you know, completely other, different parts of the country. So maybe before you get an eviction in one city, you move to another city, and the landlord doesn't know about your record. That's just not the case anymore. What's made that even easier is the number of companies that have started up that provide automated tenant screening services. And these are extremely blunt tools where a landlord just enters a name, and the software just sort of gives a thumbs-up, thumbs-down, should you rent to this person.
SHAPIRO: Wow. We've been hearing for a long time that the U.S. needs more affordable housing, but that is a long-term solution. Are there short-term ideas that can help solve this crisis?
GERSHENSON: Yes, there are so many of them. You know (laughter), I'm not even picky about which one. I mean...
SHAPIRO: Well, that's encouraging that there's a lot of them.
GERSHENSON: Yeah. And at the bottom of it, it's about giving money to extremely low-income households. During the pandemic, we had extended unemployment insurance. We had child tax credits. We had emergency rental assistance. You can imagine universal basic income. You could put more money into housing choice vouchers. You know, just when it comes down to it, households that earn something like $25,000 a year or less - that's just not enough to rent a house or buy a house in contemporary markets. These families need income support.
SHAPIRO: So there are a lot of solutions that involve helping people with money. Are there process-based solutions that change the way evictions work that might help solve this problem?
GERSHENSON: Yes. I mean, we see very clearly that the more rights that you give to tenants, the more likely they are to stay in their homes and claiming those rights in court. So in Philadelphia, there is a program that makes it mandatory that before a landlord files for eviction against a tenant, they have to go through a mediation process. So there's not going to be a mark on the tenant's record that's going to make it harder for them to find housing in the long term. Instead, you sit down, and you see if there's some sort of solution that the tenant and the landlord can come to that does not involve getting the courts involved. In New York City - New York was, I believe, the first city to establish a right to counsel for tenants in housing court. Everyone knows that if you are in a criminal court, you have a right to counsel. But in civil courts, like housing, there's no such right. And something like 90% of landlords show up with lawyers, and fewer than 10% of tenants show up with lawyers. When one side has lawyers and the other doesn't, the side with lawyers almost always wins. So by providing tenants with counsel in civil courts, we see dramatically better outcomes for these tenants.
SHAPIRO: Is the U.S. an outlier in this respect? Do other countries have models that are more successful?
GERSHENSON: We are absolutely an outlier. If you look at our peer nations, we evict at rates that are 2-3 times higher than just about every country in Europe. Really, the only country that comes close to us is Canada, but we're still significantly higher than Canada.
SHAPIRO: So what do all those other countries do differently from us?
GERSHENSON: A lot of them provide much more generous housing support, whether that be in terms of a check that you write the tenants to help them cover the rent or just in the direct provision of public housing or social housing. We have a uniquely market-based housing regime in the United States. In fact, you know, the last two years, the pandemic-era was really the only time we have seen a substantial decrease in the number of evictions. So we know it can be done, but we also know that it took sort of unprecedented federal action to actually cut into the eviction rate in the United States.
SHAPIRO: Carl Gershenson is project director of the Eviction Lab at Princeton University. Thanks for talking with us.
GERSHENSON: Thank you.
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